Gold is breaking out, and a perfect storm may be brewing for a bigger rally

Gold is on a tear, and some market watchers see further upside ahead for the precious metal.

Gold rallied to its highest level in five weeks on Monday, tracking for its best quarter since the January-March quarter of last year. Larry McDonald, publisher of the Bear Traps Report, told CNBC's "Trading Nation" that gold is breaking out and could rally further. Here are his reasons why.

• Gold has broken out on a technical basis, due in part to a more dovish-than-anticipated Federal Reserve, trade war concerns brewing in Washington and a relatively weaker U.S. dollar.

• Gold is trading at an attractive juncture, just below its 2017 peak, and may be expected to move higher in the coming weeks. Gold has gained 3.5 percent this year.

• Investors have recently piled into one popular gold miners exchange-traded fund, the GDX. These flows increased the fund's assets by its highest level since late 2017.

• Gold miners are cheap relative to spot gold, and may be one way to gain exposure to gold.

Bottom line: Gold, along with gold miners, may see a bigger rally in the coming weeks.